What home builders need from the government's long-term housing strategy

In the run up to the general election in July, the Home Builders Federation (HBF) published a blueprint for the government to tackle the housing crisis. It outlined several areas and asks that need to be addressed for supply to increase, to assist more people onto the housing ladder and accelerate the route map to low carbon, and to increase the supply of affordable housing. Among the asks was for a 10-year plan to provide a greater level of certainty for industry and investment.

The government’s aims for housing are certainly ambitious, but without confidence and certainty about the broader policy and regulatory approach over the coming years, investment will likely be stifled and targets will be missed.

While the planning reforms announced so far have gone some way in aiding this, there are still many areas of the market that remain challenged. One of these is with regard to affordable housing, particularly Section 106 housing.

The relationship between home builders and housing associations has become more intertwined in recent years as an increasing proportion of affordable homes have been delivered through Section 106 agreements. For the past decade, around half of all affordable homes built each year have been delivered through developer contributions, and last year, affordable homes made up more than a quarter of net additions to the housing stock.

This means that, unsurprisingly, achieving the government's target of building 300,000 homes relies on all cogs in the housing machine working together. But currently, both tenures of housing are facing serious issues that will impact attempts to resolve the housing crisis.

Financial constraints on registered providers have severely impacted the appetite for new S106 homes, often leaving private developers with an inability to discharge their S106 obligations. A survey of HBF members has found that more than 16,000 S106 units due for completion over the coming years are currently uncontracted, which in turn holds up the building and selling of homes for private sale too.

For the affordable housing market to increase output, a large increase in grant funding is needed. This would quickly increase demand for new homes from housing associations and other registered providers. These new, low-cost rented homes could quickly be absorbed into local markets, providing homes for people on social housing waiting lists and homeless households.

Meanwhile, affordability for prospective purchasers, especially first-time buyers, is increasingly stretched. HBF research has found that that the average first-time buyer in England must save half of their earnings for almost a decade to afford a deposit, and then spend 67% of their net salary on monthly mortgage repayments. Surprisingly, therefore, the past two years represents the first sustained period since the 1960s in which there has been no government assistance for households to get on the housing ladder.

The successes of the Help to Buy scheme in supporting buyers onto the housing ladder who would otherwise not been able to take the step and also, as recent HBF research has shown, generating positive returns for the Exchequer, demonstrate how government can intervene to support buyers and boost housing delivery. This would also be a promising long-term investment for the Treasury, with the previous Help to Buy scheme on track to deliver £2bn in returns for the taxpayer.

Recent research from Savills for HBF and the National Housing Federation found that the government will miss the 1.5 million new homes target by nearly a third without an intervention into the housing market for both social house building and first-time buyers.

The government’s recent Budget missed an opportunity to address both of these issues. While there was an announcement of £500m for the Affordable Housing Programme, the need for the government to set out its clear intentions for the future of the programme beyond 2026 at the spring Spending Review will only mount. Considering the 70% home ownership target set out in Labour’s manifesto, we are also urging the government to announce a home ownership scheme that will open the market up to more prospective first-time buyers.

Given the interconnectedness of the housing market, there is a clear need for all parts of the sector to be healthy and functioning for the housing strategy to be successful.